8-KFinancial EventsRegulation FDExhibits & Filings

EXPAND ENERGY Corp 8-K Report, Financial Obligation (Oct 12, 2017)

Filed October 12, 2017For Securities:EXEEXEELEXEEWEXEEZ

Summary

Chesapeake Energy Corporation (the "Company") announced on October 12, 2017, the issuance of $850 million in aggregate principal amount of senior notes through a private placement. This issuance comprises $300 million of 8.00% Senior Notes due 2025 and $550 million of 8.00% Senior Notes due 2027. These new notes are an additional issuance of previously outstanding notes and were offered under Rule 144A and Regulation S. The primary impact for investors is the significant increase in the Company's debt. The issuance of these notes, carrying a fixed interest rate of 8.00%, will increase the Company's annual interest expense. Investors should note the terms of the Registration Rights Agreements, which obligate the Company to file exchange offer registration statements by specific dates (June 13, 2018, for 2025 Notes and November 28, 2018, for 2027 Notes) or face potential additional interest payments. The successful completion of this private placement also satisfied a financing condition related to the Company's ongoing cash tender offers.

Key Highlights

  • 1Chesapeake Energy issued $300 million in 8.00% Senior Notes due 2025 and $550 million in 8.00% Senior Notes due 2027.
  • 2The total aggregate principal amount of new debt issued is $850 million.
  • 3The notes were issued through a private placement under Rule 144A and Regulation S.
  • 4These are additional issuances of previously outstanding senior notes.
  • 5Registration Rights Agreements are in place, requiring the Company to file exchange offer registration statements by mid-2018 for the 2025 notes and late 2018 for the 2027 notes.
  • 6Failure to meet registration deadlines could result in additional interest payments to noteholders.
  • 7The financing condition for the Company's cash tender offers was satisfied by this issuance.

Frequently Asked Questions

Chesapeake Energy issued a total of $850 million in aggregate principal amount of senior notes, consisting of $300 million in 8.00% Senior Notes due 2025 and $550 million in 8.00% Senior Notes due 2027.

The Registration Rights Agreements provide noteholders with certain exchange and registration rights. Chesapeake Energy has committed to filing exchange offer registration statements and making them effective within specified timelines (by June 13, 2018, for the 2025 Notes and by November 28, 2018, for the 2027 Notes). If the Company fails to meet these deadlines, it will be required to pay additional interest on the notes, which benefits the noteholders.

This issuance significantly increases Chesapeake Energy's total debt. The $850 million in new notes will add to the Company's outstanding debt obligations and will result in an increase in annual interest expenses by $68 million ($850 million * 8.00%), assuming these notes are not used to refinance existing debt. Investors should consider this increased leverage and interest burden.

Conducting the offering under Rule 144A and Regulation S indicates that these notes were sold to qualified institutional buyers (QIBs) in the U.S. and/or to non-U.S. persons, respectively. This typically means the securities are not registered with the SEC and are subject to resale restrictions, although the Registration Rights Agreements aim to provide liquidity for these holders through subsequent exchange offers or shelf registrations.